U. S. Bancorp on Acquisition Spree - Analyst Blog
January 31 2012 - 10:30AM
Zacks
U.S.Bancorp (USB) is on an
acquisition spree. In an effort to expand its trust business, the
company’s lead bank, U.S. Bank National Association, has agreed to
acquire the Indiana corporate trust business of UMB Bank, a
subsidiary of UMB Financial Corporation
(UMBF).
The deal is expected to be accomplished on March 2, 2012.
However, the terms of the agreement were not disclosed by the
company. To ensure a faultless transition, the U.S. Bank Global
Corporate Trust Services team will work in collaboration with the
Indiana representatives of UMB Bank.
With more than $4 trillion in assets under administration in
municipal, corporate, asset-backed and international bonds, U.S.
Bank Global Corporate Trust Services is one of the largest
providers of trustee services.
Acquisitions
Last Friday, through its lead bank, U.S. Bancorp acquired the
banking operations of BankEast, a subsidiary of BankEast
Corporation, in a deal assisted by the Federal Deposit Insurance
Corporation (FDIC). BankEast is based in Knoxville, Tennessee.
In early 2011, U.S. Bank completed the purchase of Bank
of America Corp.’s (BAC) U.S. and Europe-based
securitization trust administration businesses. This transaction
included $1.1 trillion of assets under administration and provided
U.S. Bank with approximately $8 billion of deposits during its
closure.
The acquisition strengthened U.S. Bancorp’s position as a leader
in the structured finance trust business and posed as a great
complement to its corporate and municipal trust business. Moreover,
the acquisition provided the bank with a prospect of expanding its
presence in the European market with offices in Ireland and
London.
In 2011, U.S. Bancorp acquired the banking operations of First
Community Bank (New Mexico), a subsidiary of First State
Bancorporation, in an FDIC-assisted deal. Given its asset base,
First Community Bank was New Mexico’s third-largest bank. The deal
added 35 New Mexico and 3 Arizona branches together with over
50,000 new deposit customers.
Our Take
U.S. Bancorp has a well-balanced business model, with
non-interest revenue representing nearly half of its total revenue.
Its results have been driven by a combination of acquisitions and
organic growth. Also, we expect continued investments in core
banking and fee-based operations to generate long-term revenue
growth.
Going forward, we expect U.S. Bancorp to benefit from its
diversified revenue base and strategic acquisitions, thereby
posting growth in core earnings going forward. Yet, a sluggish
economic recovery and low interest rate environment along with
regulatory issues remain our concern.
U.S. Bancorp shares maintain a Zacks #2 Rank, which translates
into a short-term Buy recommendation.
BANK OF AMER CP (BAC): Free Stock Analysis Report
UMB FINL CORP (UMBF): Free Stock Analysis Report
US BANCORP (USB): Free Stock Analysis Report
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